Tanzania Mining Act of 2010 (Vain Politics)

[H.S]

Tanzanians are notorious for political rhetoric and obsession at the expense of economic value. This habit has now evolved into a ‘culture'. The Tanzanian Parliament is actively legislating laws that are politically motivated, thus creating what I would term ‘manipulative illusions of hope' among the masses.

According to Business Monitor International (BMI), Tanzania has become "the best choice for foreign direct investment (FDI) in East Africa" attracting over $627m annually in recent years.

Such capital inflows are absolutely necessary in building the country's economic potential. Without such investments, the abundant natural resources in the ground become virtually useless. There cannot be a conversion of natural resources into human development without financial investment, investment in human capital and resource conversion.

For the country to attract investments it is necessary to create the right environment for investors who typically look for stability, security and investment protection, minimal red tape, a cooperative government and obviously the potential to earn decent returns that is reflective of the underlying risks. Tanzania has recorded some commendable success in the creation of these enablers but there is plenty of opportunity for improvement.

As a country that has experimented with Socialism and nationalization in the past, investors have been rather apprehensive on the Government commitment to respecting and protecting foreign investments. In retrospect, the Tanzanian leadership under the current and former Presidents have not only verbally assured investors that Tanzania fully respects private ownership but Tanzania also became a signatory of several multilateral and bilateral agreements on protection and promotion of foreign investments in the country. Among other international agreements, association and membership, Tanzania is a member of Multilateral Investment Guarantee Agency (MIGA) and International Centre for Settlement of Investment Disputes (ICSID).

Unfortunately, the Tanzanian government in 2010 embarked on a rather subtle derailment from that principle of respecting foreign investments with the passage of the Tanzania Mining Act of 2010, emulating the footsteps and mind-set of people like Mr. Julius Malema and President Mugabe , who instead of encapsulating realistic economic solutions that are enticing to investors and beneficial to the citizens are instead occupied with worthless populist anti investment stance without measuring the real cost and risk associated with such positions.

The Mining Act of 2010 does have some provisions that could bring very little economic value to the country; for example the increase of royalty rate from 3% to 4% can reasonably be expect to slightly increase revenues to the treasury.

However, one key provision of the act is the requirement that foreign owned mining gemstone companies cede 50% of its shares to the public/Government. One of the most fundamental flaws of the act is that it is characterized by gross ambiguity. Interpretation of this key ownership provision has caused some serious confusion among stakeholders especially when it comes to what the law entails to companies that existed prior to its enactment; a company like TanzaniteOne had been under the impression that the law requires of them to sell shares to the local stock exchange, a highly respected law firm of ‘ALN, Anjarwalla & Khanna' also made a legal commentary on their website in an article titled ‘Implicatation of the New Mining Law on Investment in Tanzania' and here is one key excerpts of the said article:

"The Mining Act, 2010, among other things, places mining rights particularly in small scale mining, dealing in minerals and gemstone operations, in the hands of Tanzania nationals and limitedly to corporate bodies who may include foreign nationals whose interests may not exceed 50% in the undertaking. Another striking feature of the Mining Act is the requirement for mining companies to list with the Dar-es-Salaam Stock Exchange (the "DSE")"

According to the Citizen Newspaper (Online version), the paper also takes a position that the act requires foreign owned mining companies to float shares at the Dar es Salaam Stock Exchange. Here is a quote from the paper.

‘The Mining Act states that, the minister shall, in consultation with holders of special mining license, make regulations that prescribe the minimum shareholding requirement and procedure for selling shares to the Tanzania nationals in accordance with the provisions of the Capital Market and Securities Act, offering shares to the public through listing with the stock exchange.'

Additionally, even the chairman of the Public Organizations Accounts Committee (POAC), Mr. Zitto Kabwe was quoted by several news outlets as saying that (Mining Act of 2010) was very clear that all mining companies were to be listed at the DSE.

If this is what the law intended it would make sense because it would give Tanzanians an opportunity to own a stake in local mining companies and companies would be accorded an organized and regulated platform to raise capital.

However, contrary to the understanding of lawyers, investors, journalists and even the very legislators who passed the law, the government through the Deputy Minister for Energy and Minerals Mr. Stephen Masele was quoted by The East African newspaper and several other news media as saying that that the firm (TanzaniteOne) must relinquish the stake to Stamico as a precondition for renewing its operating license. "The company wants the state to buy the shares, but our position is that the firm ought to offload the stocks to Stamico free of charge or else lose the license," said Mr. Masele. Several other newspapers have quoted the Deputy Minister of making the same statement.

How can Tanzania be touting to be a country that respects and protects private ownership and investments when the government is making such extortionist statements?

So we now have a situation where Parliament and the Government have different versions of what is expected and legally demanded of foreign owned gemstone companies.

First and foremost, this path of forceful nationalization of private assets seriously contradicts the terms offered to TanzaniteOne to set up business in the country and is nothing less than legalized extortion. Wiping the value of foreign investors by the strike of a pen does not create an environment of trust, without investor confidence there is basically no economic growth.

Inviting investors to come into the country and then nationalizing their investments as a condition to continue operations is somewhat amateurish. There is not a single country in the developed world that has prospered by playing such games of moving the goal post.

Government officials tasked with the responsibility of attracting foreign investments are going to have a very hard time soliciting investments into the country. Why should an investor trust the government and invest in other sectors when the Government is setting a precedence of nationalizing half of TanzaniteOne shares? Why should one believe other sectors are safe when the same government has powers across all sectors of the economy?

Since the passage of the 2010 Mining Act, we have not heard of a single foreign owned company that has willingly decided to come into the country, invest millions of dollars and freely cede half of the equity to the Government. The provision is virtually economically useless because it simply makes no sense to investors. Financial statements of companies like TanzaniteOne do not in any way suggest that the shareholders are earning super profits so it makes no business sense whatsoever to even assume that a major gemstone mining company will find it justifiable to come into the country with $100m in investment and freely give away $50m as a condition to come into the country. Many countries including neighboring countries with proven gemstone deposits do not impose such a requirement, why should one agree to such a demand by the Tanzanian government? There is nothing patriotic about legislating economically worthless investment demands.

On the surface this may sound advantageous to the indigenous gemstone miners because one could argue that now the indigenous will have a bigger turf to mine gemstones. However, in practice this cannot be true because local miners lack the expertise of forward integration and the practical experience of international marketing required to establish globally recognized brands. Furthermore, local miners are seriously lacking financing. When the Government recently made a decision to increase licensing fees for small miners many of them expressed concerns over inability to even pay for licenses. There are strong signs that gemstone miners in Tanzania are more likely to continue to be mere price takers of foreign buyers.

This act, per government interpretation, is not in any way going to insulate foreigners from investing in Tanzania's gemstone mining sector as Tanzanians are led to believe. In today's world of complex business transactions and sophisticated derivatives, there are many vehicles of directly benefitting from the gemstone mining sector without the need of owning a mining company:

Here are some very basic examples of how a foreign investor could structure his ‘significant interest' in gemstone mining Tanzania without having to cede 50%:

Invest in equipment instead of shares:
A significant item on the balance sheet of any major mining company is equipment. The laws in Tanzania do not prevent foreigners from leasing mining equipments. Why cede 50% shares of a mining company if one can earn income in the same industry by financing equipments?

Participate as a financer:
The law does not prohibit a foreign lender from financing a gemstone mining undertaking in the form of direct loans. If an investor is projecting 15% annual return as a shareholder, cessation of 50% will reduce the same return by half and this can be legally circumvented by participating as a financer/lender who requires a fixed return on his loan and simply pay 10% withholding tax on interest income.

Participate as a major buyer with preferential pricing:
It is not unusual for a major buyer to have exclusive contracts with suppliers in which the supplier agrees to sell all production to a single buyer. A foreign investor in Tanzania stands to gain from the sector under such arrangement and even dictate the price in exchange for benefits to a local miner that the government does not extend to local miners.

There is nothing of economic value that this demand of free ownership of gemstone mines will bring that cannot be achieved through taxation and regulation. Any meaningful goal pertaining to revenue generation and conduct in gemstone mining can be achieved through taxation and regulation, period.

The Mining Act of 2010, as understood by the government, does not entice foreign investors to come into the country and give away half of his gemstone mining investment, it is now about 3 years since the law was passed and not a single foreign investor has come to the country with $100m investment and gave away his $50m freely. It simply does not make any business sense and is not reflective of the competitive nature of the global investment climate. A climate in which there is competition to solicit investments not only at country level but also at city level. Neither does the law insulate a foreign investor from benefitting from the gemstone sector on his terms using non shareholder vehicles I have briefly mentioned.

While the developed world is empowering their citizens through skill development as well as providing them with sophisticated financing tools to tap not only into the local resources but to also explore opportunities outside their borders, it is quite peculiar and disappointing to see Tanzanian politicians getting obsessed with cheap politics on whose name should be on the shareholder registry of gemstone companies; i.e. between a citizen or a foreigner!

Zimbabwe's Indigenization and Economic Empowerment Act of 2010 demands that foreign companies valued at over $500K to sell 51% shares to locals, President Mugabe himself has admitted that the policy has failed to achieve the intended results. President Mugabe has tried these political games and failed, the games failed miserably. The State run Herald newspaper has quoted Mr. Mugabe of making honest admission that forceful nationalization does not work, from Mugabe's own words "The process of taking 51 percent shareholding is only a process of empowering our people in companies that exist. The greater part is of our own people forming their own companies, to do that on their own not just taking what has been done by others." Establish your own mining enterprises; this is where I have a battle with you educated young people."

It is evident from President Mugabe's experience that preying on private property is not the answer and that the real answer lies in establishing new and sustainable enterprise. The Arusha Declaration of 1967 subsequently led to the nationalization of private investments including factories, these businesses resulted in massive failures and Tanzanians did learn that the way forward is re-privatization but now it seems like the country is too oblivious and repeating the same philosophical blunders.

The Tanzanian position is actually worse than Mr. Mugabe's, at least he is demanding that the shares be sold, in Tanzania the Government is demanding to be a free loader.

In any business transaction there is one important rule, winners and losers can be identified by following the money trail. The scandalous Kagoda company has ‘shareholders', is there anyone in his right mind who believes that the real beneficiaries of that scam are those ‘poor shareholders'?

I challenge MPs who ratified the Tanzania Mining Act of 2010 to come forward and set the record straight. Is the ownership provision of the Mining Act of 2010 intended to encourage citizens to ‘acquire' ownership of investments by buying stock or if the intent was to actually demand free shares.

If the intent was to make it a prerequisite to get free shares why should any serious investor be willing to come to Tanzania and offer free shares just to have his name in the company registry when there are many other perfectly legal ways to tap into the sector and benefit without being a shareholder? What would make any investor in his right mind believe that that such a demand is economically feasible? If the provision makes any business sense how come we do not have a single investor who came to the country and threw away half of his investment for free?

If the intent of the provision was to enable public ownership through acquisition and not extortion though nationalization, would you all be willing to categorically state that the government's position is inconsistent with your own understanding of the ownership provision? Why have you been silent if the government is wrong and one of your legislative responsibilities is to oversee the government and create checks and balances?


Stay Blessed.

CC Ogah, JingalaFalsafa, jouneGwalu, Zakumi, Bongolander, Kichuguu, Mzee Mwanakijiji, Nguruvi3, Mchambuzi, Mimibaba, John Mashaka, Zitto, Kitila Mkumbo, Ngongo, Ritz, EMT, Raia Fulani, John Mnyika, Rutashubanyuma, Shayu, Kigarama, Petro E. Mselewa, WOWOWO, Mkandara, lara 1

 

[V.P]

Hoja nzito.

Let us see kama waliopitisha hiyo sheria watajibu ama wataingia mitini?

 

[Shayu]

Good article. Thank you for sharing. We need more people like you on Jf.

 

[Kichuguu]

This article has a one plus, a one minus and a one neutral.

The one plus is in its effort to remind the government on respecting private property, and that private investment is the engine of the economy.

The minus part of the article lies in that fact that it puts more respect on private capital investment and forgets the natural resources investment. We know that a farmer who does not own the farming land will have to share profits with the landowner. Investment in mining is not same as investment in factories or hotels, because mining, like agriculture will always require some natural resources which are owned by the Government of Tanzania. You cant invest in mining Gold on land that does not have gold deposits. The math of investing $100m and giving the government $51million is also totally false, and I think every reader can see this mistake.

Probably what can be said at this moment is that since the government made mistakes in signing contracts that forgo its ownership of the land, it should respect those contracts and start implementing the new law only on new contracts. Additionally, one can argue that 51% is too high, and the government should reconsider it and come up with a reasonable share of anything between 25% and 35%. It is inappropriate to use Tanzania's past experience as a weapon to rip off her rights on her natural resources in favor of foreign investors.

The neutral part of the article is in its observation that the Act is poorly written; I regard this to be a neutral observation because almost all Acts in Tanzania are poorly written. Therefore, there is nothing new in the quality of the language used in the Act.

Although I will not provide details at this time, it is important to note that the article also errs in comparing Tanzania effort to correct its Mining Act and Zimbabwe's indigenization policies. We can discuss this in a separate thread if necessary, because the Zimbabwe's experiment has too many facets.

 

[Kigarama]

Phew! A good and well researched article, but as Kichuguu mentioned that its "minus part" washed out the taste of the article because nonetheless profit gained from the Foreign Direct investment through various taxes, Public as whole get nothing because of those "Manipulative Politicians" for their "Manipulative and ambiguous vision" legislating the law that partial seems to Protect Locals but in a real sense it protect themselves and their Capital ready to be invested when the shares of gemstones companies Listed at the DSE!!

 

[Zitto]

Naomba tuanze mjadala huu kwa kuangalia makala hii niliyoandika katika gazeti la RaiaMwema. Kisha tutajadili suala la Sheria ya Madini kwa muktadha huu


Utajiri wa nchi mali ya nani?

Zitto Kabwe

NANI ana miliki ya dhahabu yote iliyogunduliwa Tanzania hivi sasa? Nani ana miliki yote ya misitu iliyopo nchini? Nani ana miliki ya gesi asilia iliyogunduliwa hivi karibuni mikoa ya Pwani, Lindi na Mtwara? Watanzania wachache sana wanayo majawabu ya maswali haya.
Inasikitisha hata Watanzania tuliopewa fursa ya kuwaongoza wenzetu milioni 45 hatuna majawabu na wala hatutafuti majawabu ya swali hili. Viongozi tunawaambia wananchi kwamba "maliasili ya nchi ni mali ya umma." Ni kweli mali ya umma? Umma ni nani? Hebu tuangalie mfumo wetu wa miliki ya rasilimali za madini, mafuta na gesi asilia.

Katiba ya sasa ya Jamhuri ya Muungano wa Tanzania haisemi lolote kuhusu ‘miliki' ya utajiri wa taifa. Isipokuwa katika ya kifungu cha tisa (c) na (i) na ibara ya 27 (1) suala la maliasili ya nchi limewekewa masharti ya Katiba.

Ibara ya 9 (c) inasema shughuli za serikali zitatekelezwa kwa njia ambazo zitahakikisha utajiri wa taifa unaendelezwa, unahifadhiwa na unatumiwa kwa manufaa ya wananchi wote kwa ujumla na pia kuzuia mtu kumnyonya mtu mwingine. Ibara ya 9(i) inasema matumizi ya utajiri wa taifa yatatilia mkazo maendeleo ya wananchi na hasa zaidi yanaelekezwa kwenye jitihada ya kuondosha umasikini, ujinga na maradhi.

Ibara ya 27 inahusu wajibu wa raia kulinda maliasili ya Jamhuri ya Muungano. Ibara ya 9 kuna masharti ya Katiba ya kujenga Ujamaa. Hakuna ibara ya Katiba inayozungumzia ‘miliki' ya utajiri wa taifa. Suala hili liliachiwa sheria zilizotungwa na Bunge. Kwa suala utajiri tuliochagua kufanyia kazi katika makala haya sheria hizo ni Sheria ya Madini ya Mwaka 2010 na Sheria ya Utafutaji wa Mafuta ya Mwaka 1980.

Nani anamiliki madini nchini?

Sheria ya madini ya mwaka 2010 imesema madini ni mali ya umma, hata hivyo, imeweka masharti ya kuhamisha umiliki huu kwa watu na kampuni binafsi kwa mtindo wa leseni. Dhahabu ni mali ya umma pale tu utafutaji wake na hatimaye uchimbaji haujatolewa kwa mtu binafsi. Leseni ikishatolewa miliki (mineral right) inahamia kwa mwenye leseni na hapo taifa linabakia kupata mrabaha tu kama tozo ya uvunaji wa rasilimali hii.

Kiuhalisia, mfumo huu unaruhusu maliasili ya nchi kumilikiwa na watu binafsi wawe raia wa Tanzania au la. Angalia mfano huu.
Kampuni iitwayo ZiMinerals LTD kutoka Canada inakuja Dar es Salaam katika Wizara ya Nishati na Madini na kuomba leseni ya kutafuta dhahabu huko Kahama. Wizara inampa leseni ya utafutaji ya mamia ya kilometa za mraba. ZiMinerals inakwenda kujiandikisha katika soko la mitaji la huko Australia na kuanza kukusanya fedha kwa kutumia leseni ya utafutaji dhahabu Tanzania.
Ikishapata fedha inaanza kazi ya kutafuta na baada ya kupata kiwango cha dhahabu wanatangaza na bei ya hisa za kampuni hii zinapanda maradufu. Serikali inaipa kampuni hii leseni ya kuanza kuchimba na kampuni sasa inaanza kuuza dhahabu duniani au inauza miliki hii kwa kampuni nyingine kubwa na yenye uzoefu zaidi au mtaji zaidi.

Kitendo cha ZiMinerals kuuza hisa zake huko Australia tayari miliki ya rasilimali iliyopo Tanzania inakuwa inamilikiwa na wananchi wa nchi hiyo au raia wa nchi nyingine yoyote duniani mwenye kuweza kununua hisa katika soko ambalo hisa za ZiMinerals zinauzwa.
Hivi ndivyo inafanyika. Wanakuja watu hawana hata nguo ya kubadili, wanapata leseni wanakwenda kwao kukopata fedha kwenye masoko ya mitaji na wanakuwa matajiri wakubwa kwa kutumia miliki ya rasilimali za Tanzania na Watanzania wanabaki fukara.
Hivyo ndivyo ilivyofanyika Bulyanhulu, Kampuni ya Sutton Resources ilipewa leseni, ikaenda sokoni kufanyia biashara leseni hiyo, wakawekeza dola za Marekani 20,000 kwenye utafutaji kisha wakauza leseni yao kwa Kampuni ya Barrick Gold, kwa Dola milioni 348. Kwa hiyo tunaposema maliasili hii ni ya taifa tunajidanganya tu. Ukishatoa leseni kinachobaki cha taifa ni ule mrabaha wa asilimia nne tu kwa mujibu wa sheria mpya ya madini ya mwaka 2010 iliyoshinikizwa na sakata la Buzwagi.

Kwa upande wa rasilimali ya gesi asilia na mafuta hali ni tofauti. Miliki ya umma inakuwa ni milki ya serikali na inasimamiwa na Shirika la Umma la Mafuta, hivi sasa TPDC. Kwa hiyo, kwa mfano, kampuni ya ZiGas Limited kutoka Australia inapokuja hapa nchini na kuruhusiwa kutafuta mafuta au gesi na kisha kuchimba, inakua imeajiriwa na TPDC.

Ikienda kule Australia kutafuta fedha itauza kwenye soko ile asilimia yake tu, mara nyingi ni asilimia kati ya 80 na 85. Lakini pia hata ikiuza mafuta au gesi, kulingana na kiwango cha mauzo hayo, asilimia sio chini ya 60 ya mauzo baada ya kuondoa gharama za uzalishaji inachukuliwa na TPDC (serikali). Hata hivyo tofauti na madini, mrabaha sasa unalipwa na TPDC kwa serikali na sio hii kampuni ambayo ni kama mkandarasi (contractor) wetu. Kwenye gesi tunaweza kusema mali yetu, ingawa si kwa asilimia 100.

Kwa nini mifumo tofauti?

Hakuna maana yoyote ile zaidi ya umazwazwa (ujuha) tu. Kwa nini kampuni za ndani ama za serikali au za watu binafsi haziendi kutafuta fedha kwenye masoko ya mitaji na kufanya utafutaji na kisha kuvuna utajiri huu? Ni ujuha tu maana yote yanawezekana.
Walipokuja Ophir Energy hapa Tanzania na kupata mkataba wa kutafuta mafuta kwenye kitalu namba moja kule Bahari ya kina kirefu mkoani Mtwara, walikwenda kuuza hisa kwenye soko la mitaji na hisa moja ilikuwa inauzwa senti nne ya Pauni ya Uingereza (4 pences). Huu ulikuwa ni mwaka 2006.

Mwaka 2011 baada ya kupata gesi asilia kwenye visima kadhaa, hisa moja ya kampuni hii ilifika senti 654 ya Pauni (654 pences). Licha ya bei kupanda namna hii lakini pia waliuza sehemu ya kampuni yao kwa Kampuni ya BritishGas na kupata mabilioni ya pauni za Uingereza bila Tanzania kupata lolote licha ya biashara hii kuwa ni mali iliyopo Tanzania.

Hivi kweli baadhi yetu tunasimama na kusema gesi asilia mali ya umma? Dhahabu mali ya umma? Almasi mali ya umma? Tuna wadanganya wananchi. Lazima kufanya mapinduzi ya kifikra na kivitendo. Maandamano ya watu wa Mtwara yasukume Watanzania kufukua zaidi kuhusu unyonyaji wa utajiri wa nchi. Mapinduzi ni lazima.

Katiba ya nchi sasa iseme kinagaubaga kuwa rasilimali ni mali ya wananchi (sio mali ya umma). Miliki (mineral right) ya utajiri wa nchi iwekwe kwenye mikono ya wananchi wenyewe kwenye maeneo ambayo rasilimali imepatikana au inatafutwa. Serikali itakuwa ni msimamizi wa uvunaji wa rasilimali hii kwa manufaa ya wananchi wote. Wananchi wa eneo ambalo rasilimali inatafutwa au imepatikana wawe na haki ya kuridhia kuvunwa kwa rasilimali hiyo kabla Serikali Kuu haijatoa ruhusa ya kuvunwa kwa rasilimali hiyo (The right of prior informed consent).
Mapinduzi haya ya umiliki wa rasilimali za nchi kutoka kwa serikali kwenda kwa wananchi wa maeneo yenye rasilimali kutawezesha mrabaha wote unaolipwa na kampuni za uvunaji wa rasilimali kulipwa kwa wananchi hawa kupitia serikali zao za mitaa na majimbo (provinces).

Mapato haya ndio yatafidia kuondolewa kwa wananchi kwenye mashamba yao kupisha uvunaji huu au kufidia samaki wanaopotea kutokana na uchimbaji mafuta na gesi kwenye bahari. Ieleweke kwamba mrabaha si kodi bali ni tozo la fidia kwa kunyonya (kuvuna) mali katika eneo husika. Viongozi tunaposema maliasili ni mali ya taifa tuna maana fedha zitokanazo na maliasili ni mali za taifa. Hivi tumewahi kujiuliza madhara ya uharibifu wa mazingira nayo ni madhara kwa taifa zima?

Kwa mfano madhara ya kuchimba mafuta kule Mtwara, madhara ya kimazingira ikiwamo sumu yanamilikiwa kwa pamoja kati ya Kigoma na Mtwara au Kigoma itafaidi tu dola zitakazotokana na gesi ya Mtwara lakini Mtwara itaumia peke yake na uharibu mkubwa wa mazingira unaotokana na uchimbaji wa gesi. Tusiwe na midomo mikubwa kuona fedha za kugawana nchi nzima na kufumbia macho uharibifu mkubwa wa mazingira na upoteaji wa maisha unaowaathiri Watanzania wanaoishi kwenye maeneo fedha hizo zinatoka.

Sumu katika Mto Tigite kule Tarime haigawanywi kwa Watanzania wote isipokuwa mapato ya dhahabu, japo nayo ni kidogo tu maana miliki ni ya kampuni binafsi, inayovunwa na kuchafua maji ya mto huu inagawanywa kwa Watanzania wote. Hatuwezi kuendelea kuwa na taifa ambalo Wilaya ya Geita yenye mgodi mkubwa zaidi wa dhahabu barani Afrika, ukiondoa Ghana na Afrika Kusini lakini ni masikini zaidi Tanzania. Halafu tunasema maliasili ni mali ya taifa. Turudishe rasilimali kwa wananchi.

 

[Zitto]

There are two things to be considered here. One is the issuance of licences for gemstone mining. The Law is very clear that only Tanzanians can own licences to mine gemstones. Foreigners will only be allowed if 50% of the shares are held by Tanzanians. I insist 'licences issued to Tanzanians only'.

Two is the issue of existing licences that need renewal. This is the case of TanzaniteOne. You will not solve this from the new law as it will be applying the law retrospectively (on the part of issuance of licence). Thus, the government was to engage the company and agree on the best way to observe the provisions of the law. In Parliament in my speeches i advised a Botswana model on Tanzanite mining ie the govt and a foreign company owning 50% each.

Alternatively is for the foreign company to float shares at stock market to meet requirements of the law. I prefer the latter because of transparency based on disclosures as required by the capital markets rules. Having shares held by STAMICO would look good but will not empower the people economically and it will not end corruption and rent seeking behaviour entrenched in parastatals. Transparency can be wel achieved through capital markets.

Now what is the problem?

- There is a provision in the law about listing at DSE (up to now no provisions about this has been issued by the ministry of energy and minerals)
- There is a provision about mineral rights issued to who?

These two separate provisions are being confused by investors as well the govt. For example TanzaniteOne would sell shares to 50% to one Tanzanian and meet the requirements of the law, simple. But this route is not sustainable. But the law doesnt say those shares must go the state company. It has to be out of negotiations with the government.

I would like to bring to your attention that in the new law there is a provision for government stake in mining companies which is separate from listing and from gemstone licences.

On the new law being a political i strongly disagree. This is the best law ever and actually it needs further improvements to favour Tanzania. Currently it still favour investors and governments and not wananchi.

We want a Win-win-Win situation. The third win is the people and it is not mentioned at all.

 

[Kichuguu]

Zitto and the rest.

Mheshimiwa umejitahidi sana kulieza jambo hili kisheria katika lugha ambayo unless mtu hataki kuelewa tu lakini vinginevyo kila matu atakuelewa. Hata hivyo nitarudia tena kuwa katika ufundishaji wangu wa zaidi ya miongo miwili nimekuwa nasisitiza kwa wanafunzi wangu kujifunza namna ya kutoa mawazo yao katika lugha rahisi sana inayoeleweka kwa wote bila moshi wowote. Nina Cartoon kadhaa ambazo nimekuwa nakusanya na kuzitumia katika hilo na mojawapo ni hii hapa.

Hapa kuna jambo dogo sana ukiachana na jargons na ujanja ujanja wa kisheria; ardhi ya Tanzania ni mali ya serikali na iwapo utawekeza katika sehemu ya ardhi ambayo ina mali nyingi ni lazima utegemee kuwa serikali nayo itafaidika na uwekezaji wako. Huwezi kulima kwenye ardhi ya mwenzio halafu ukala faida yote! very simple.

 

[H.S]

This article has a one plus, a one minus and a one neutral.


The minus part of the article lies in that fact that it puts more respect on private capital investment and forgets the natural resources investment. We know that a farmer who does not own the farming land will have to share profits with the landowner. Investment in mining is not same as investment in factories or hotels, because mining, like agriculture will always require some natural resources which are owned by the Government of Tanzania. You cant invest in mining Gold on land that does not have gold deposits. The math of investing $100m and giving the government $51million is also totally false, and I think every reader can see this mistake.

I am not sure if I understand what you wrote because a farmer and a land-owner or even a farmer and a factory owner can have a business relation in which any exchange is based on price and output ​ and profit is not the denominator. A land owner can charge X shillings for every coconut and neither the land-owner nor the farmer is involved in the profits of the other. I also do not understand what you mean when you say the math is incorrect, the government has said over and over again that TanzaniteOne must cede half of its equity to Stamico and I even quoted the Deputy Minister, this means if the equity is $100m the company must cede $50m.

 

[H.S]

Naomba tuanze mjadala huu kwa kuangalia makala hii niliyoandika katika gazeti la RaiaMwema. Kisha tutajadili suala la Sheria ya Madini kwa muktadha huu


Hivyo ndivyo ilivyofanyika Bulyanhulu, Kampuni ya Sutton Resources ilipewa leseni, ikaenda sokoni kufanyia biashara leseni hiyo, wakawekeza dola za Marekani 20,000 kwenye utafutaji kisha wakauza leseni yao kwa Kampuni ya Barrick Gold, kwa Dola milioni 348. Kwa hiyo tunaposema maliasili hii ni ya taifa tunajidanganya tu. Ukishatoa leseni kinachobaki cha taifa ni ule mrabaha wa asilimia nne tu kwa mujibu wa sheria mpya ya madini ya mwaka 2010 iliyoshinikizwa na sakata la Buzwagi.

Ndg Zitto, kwanza nakushukuru sana kwa moyo wako wa kujitokeza na kuchangia hii mada muhimu sana pamoja na ku share mifano kadhaa katika kujenga hoja yako.

I am assuming that huna tatizo kuona wawekezaji wanakuja nchini na wanapata faida ila jambo linalokusumbua ni kwamba mfumo tulionayo si wa win-win.

Katika makala yangu niliweka jambo moja wazi and in bold, nilisema hakuna faida yoyote ya kiuchumi ambayo haiwezi kupatikana katika gemstone mining industry ambayo ili ipatikane ni lazima serikali imiliki hisa, nilisema lengo lolote lenye manufaa linaweza kupatikana kupitia katika mfumo wa kodi ama regulation.

Kutokana na mfano huo uliotoa kwanza niseme wazi kwanza inasikitisha sana.

Utakumbuka kwamba Barrick walikuwa katika mazungumzo na China National Gold Group, mazungumzo yaliyokuwa yana lengo la kuwawezesha Barrick kuuza 74% stake kwa Wachina na mazungumzo yale yalikwama na moja ya sababu ni kwamba Serikali ilipitisha Capital Gains tax ili na wananchi wapate mapato kupitia mfumo wa kodi.

Swali langu kwako ni je unakubaliana na mimi kwamba katika yale mauzo ya $348m Taifa lingeweza kupata kile amabacho tunaona tunastahili kupitia mfumo wa kodi? Kama gharama za Sutton Resources zinajulikana, bei waliouzia inajulikana, faida waliopata inajulikana kwa nini mfumo wa kodi usiboreshwe na uwe jibu la kutuwezesha kupata cha kwetu na badala ya hizi 'nyimbo' za government ownership?
Kama tungekuwa tunamiliki nusu ya hisa za Sutton maana yake ni kwamba tungekuwa entitled to nusu ya hiyo gain, halikadhalika mfumo wetu wa kodi unaweza kuboreshwa na sheria ikasema in such situations we will be entitled to nusu ya hayo mapato. End of the day what goes to the treasury coffers ni kilekile, so what is the justification of all this hype on free government ownership?

Kwa sasa tuweke pembeni hoja ya kuwataka wageni wauze hisa DSE, faida ya hilo zinaeleweka.

 

[H.S]

Zitto and the rest.

Hapa kuna jambo dogo sana ukiachana na jargons na ujanja ujanja wa kisheria; ardhi ya Tanzania ni mali ya serikali na iwapo utawekeza katika sehemu ya ardhi ambayo ina mali nyingi ni lazima utegemee kuwa serikali nayo itafaidika na uwekezaji wako. Huwezi kulima kwenye ardhi ya mwenzio halafu ukala faida yote! very simple.

Mwalimu, dhamira yangu si kusema kwamba wawekezaji wa kigeni wale peke yao. Hoja yangu ya msingi ni kwa nini tunaamini Serikali kuwa na hisa ndio jibu la kutuwezesha sote tule wakati tunao mfumo wa kodi.

Nimesema hakuna faida ya kiuchumi inayoweza kupatikana through Government ownership (free equity not establishment of new companies) of gemstone mines ambayo haiwezi kupatikana kupitia taxation and regulation.
Kama ipo faida ningekuomba uitaje na pia kumbuka kwamba hapa nazungumzia gemstones sizungumzii gesi asilia, sizungumzii mafuta. Changamoto hii nilishawapa watu zaidi ya 20 wakiwemo PhDs na hakuna aliyenipa jibu.

 

[H.S]

There are two things to be considered here. One is the issuance of licences for gemstone mining. The Law is very clear that only Tanzanians can own licences to mine gemstones. Foreigners will only be allowed if 50% of the shares are held by Tanzanians. I insist 'licences issued to Tanzanians only'.
.

Ndg Zitto, this requirement seems political and not economic.

Hii Licensing requirement inamzuia vipi mgeni kuendelea kufaidika na rasilimali za gemstone?

Did Parliament assume that a foreigner cannot come into the country and find a citizen who will 'work for him' and even obtain a license for him (foreigner) under his (citizen) name?.

Pia tukumbuke kwamba hakuna mgeni anayekuja nchini na kutajirika bila ya 'cooperation' ama 'collusion' ya wenyeji. Mgeni 'huwezeshwa' na consultants, wanasiasa, viongozi wa serikali etc. Bottomline ni kwamba Watanzania wanaofaidika wapo, kwa nini tuamini 'msaada' huo hauwezi kuchukua sura ya '100% Tanzanian Ownership' while in actuality it is nothing more than a perfectly legal proxy arrangement?

 

[John Mashaka]

Ndg Zitto, this requirement seems political and not economic.

Hii Licensing requirement inamzuia vipi mgeni kuendelea kufaidika na rasilimali za gemstone?

Did Parliament assume that a foreigner cannot come into the country and find a citizen who will 'work for him' and even obtain a license for him (foreigner) under his (citizen) name?.

Pia tukumbuke kwamba hakuna mgeni anayekuja nchini na kutajirika bila ya 'cooperation' ama 'collusion' ya wenyeji. Mgeni 'huwezeshwa' na consultants, wanasiasa, viongozi wa serikali etc. Bottomline ni kwamba Watanzania wanaofaidika wapo, kwa nini tuamini 'msaada' huo hauwezi kuchukua sura ya '100% Tanzanian Ownership' while in actuality it is nothing more than a perfectly legal proxy arrangement?

I agree with you 1000%. Our politicians really have no clue on how economies work and the methodologies to court foreign investors. Retention of the investments is another issue. What our politicians are doing right now is pretty much what many have predicted, kicking out Direct Capital inflow into the country unknowingly. I tend to believe that many of them lack the clear understanding on how the global economies function. They may be having people’s interest at heart, however, they lack the legal and technical know how

I have tried to inform our officials of Tanzania's poor standing in the capital markets. Borrowing in the US to fund a project in Tanzania is quite costly factoring in risks and so forth. Similar projects in Brazil, Argentina, and even in Mexico would cost quite less in terms the interest. Unfortunately none of the politicians understands while thinking of their own interests.

Things are not rosy for Tanzania as they may think. Many Hedge Funds can finance projects worth billions of Dollars in Tanzania. Unfortunately none of them is interested investing in an environment where government/officials interfere to have ownership on the investment they don’t anything about. In some countries Investors do accept state partial ownership, and thats when the Government infuses Cash or liquidity required. Not just demanding 50% share. Risks are high in these kinds of environment and none pursues further investing in such a country. There is so much at stake. Tanzania must think twice!

Mr. Zitto, The country lacks the capacity. Lets say large scale mining require billions of dollars. Where in the are the local investors going to come up with the 50% ownership in a $3billion investment? If they do have that kind of money, then Tanzania does not need foreign investors.

I have tried to contact Mr. Zitto several times in the past to have some dialogue on some of these issues, apparently he doesn’t respond. This is a hot topic; let’s see if he is willing to engage because he has been championing the cause (Mining and energy Cause). Hon: H.S Kindly keep in touch. I am going to support your argument. We are on the same page.

 

[John Mashaka]

There are two things to be considered here.

One is the issuance of licences for gemstone mining. The Law is very clear that only Tanzanians can own licences to mine gemstones. Foreigners will only be allowed if 50% of the shares are held by Tanzanians. I insist 'licences issued to Tanzanians only'.

Mr. Zitto, I know your love for the country. Unfortunately this cannot work. Tanzania lack the capacity. It is 21Trillion in debt. Meaning the country will have difficulty borrowing in the international arena, unless extremely important projects backed by World Bank/ IMF guarantee. You must also consider the fact that, in 2012 the country attracted less than $700 million in foreign investment. Where will the country get the money in a $3billion mining investment

In Parliament in my speeches i advised a Botswana model on Tanzanite mining ie the govt and a foreign company owning 50% each.

Such kind of move must be stipulated in the initial contract to, otherwise it is a political process of keeping at bay foreign investors. To be honest, this is not practical especially in a donor dependent country like Tanzania

Alternatively is for the foreign company to float shares at stock market to meet requirements of the law. I prefer the latter because of transparency based on disclosures as required by the capital markets rules. Having shares held by STAMICO would look good but will not empower the people economically and it will not end corruption and rent seeking behaviour entrenched in parastatals. Transparency can be wel achieved through capital markets.

Participation at the Stock Market is a discretion of a company. Mr. Zitto, Please help me here. How can Transparency be achieved through Capital Markets?

Seriously?

- There is a provision in the law about listing at DSE (up to now no provisions about this has been issued by the ministry of energy and minerals)
- There is a provision about mineral rights issued to who?

I hope the provision/s do not compel an investor in the mining sector into DSE listing.

These two separate provisions are being confused by investors as well the govt. For example TanzaniteOne would sell shares to 50% to one Tanzanian and meet the requirements of the law, simple. But this route is not sustainable. But the law doesnt say those shares must go the state company. It has to be out of negotiations with the government.

Mr. Zitto, this is disastrous policy/law. Why would the government require an investor to sell 50% of its shares? You are already in the legislative body. We are more happy to work with you on restructuring these sorts of laws. No-wonder investors keep on changing names and ownership in Tanzania. This could be the root cause.

 

[H.S]

Ndg Zitto,

Ninaamini utakubaliana na mimi kwamba mada hii ni mada muhimu sana kwa sababu tuna rasilimali nyingi nchini lakini wananchi wana hali ngumu sana ya maisha.

Kutokana na unyeti wa mada hii ninaomba tuwe na mdahalo on Tanzania Mining Act of 2010 ambayo ulishiriki kuupitisha na ambao unaamini una faida kwa wananchi.

Kimsingi mimi na Ndg J. Mashaka tunachokiona katika sheria hiyo ni siasa endelevu na hakuna faida ya kiuchumi, as a matter of fact tunachokiona ni sheria yenye madhara makubwa sana on the economy.

So let us find some time to have a live debate kupitia radio for about an hour na mdahalo unaweza kuwa coordinated na JF.

Me and Ndg. John Mashaka Vs Ndg Zitto and any MP(s) of your choosing who see economic value in that legislation.

Eagerly waiting for your response and confirmation. Upon your confirmation we shall go over other modalities.

 

[AshaDii]

This is a good and impressive analysis… As a result of my thirst of knowledge I am however kind of awestruck in understanding some areas/points. Mkuu H.S like you yourself have scrutinized the matter and acknowledged like three sources averring an understanding of what entails The Tanzania Mining Act of 2010; an understanding which is promising and not only giving an opportunity to Tanzanians to own a stake in local mining but also be of benefit to all at large regardless of ownership or not. These averred understandings as per your article were prior to the Government stance on the Act, via The Deputy Minister for Energy and Minerals.

Captivating the fact that this is an improved Mining Act (thus inevitably a lot better than the last one) regardless to the problem of ‘ambiguity’ you deem to have transpired; Should we be worried of the Minning Act itself or the Government’s mal-interpretation of the Mining Act?

 

[H.S]

This is a good and impressive analysis… As a result of my thirst of knowledge I am however kind of awestruck in understanding some areas/points. Mkuu H.S like you yourself have scrutinized the matter and acknowledged like three sources averring an understanding of what entails The Tanzania Mining Act of 2010; an understanding which is promising and not only giving an opportunity to Tanzanians to own a stake in local mining but also be of benefit to all at large regardless of ownership or not. These averred understandings as per your article were prior to the Government stance on the Act, via The Deputy Minister for Energy and Minerals.

Captivating the fact that this is an improved Mining Act (thus inevitably a lot better than the last one) regardless to the problem of ‘ambiguity' you deem to have transpired; Should we be worried of the Minning Act itself or the Government's mal-interpretation of the Mining Act?

Thanks for your comments. Please allow me to be very upfront and bold, The Mining Act of 2010 is 'pretty useless', it is lacking in economic merit, it is lacking in value proposition to investors and that is why it is now over 3 years since it was passed by Parliament and not a single investor came to the country to give away 50% of free equity.

That is why I am now suggesting that we have a live radio debate so that both sides will have an opportunity to support or critique the law.

 

[Kichuguu]

H.S. Nitakachokubaliana na wewe ni hapo kuhusu njia ambayo serikali inavyotaka kujipatia haki yake. Ni kweli kuwa wangefanya hivyo labda kwa kupitia kodi badala ya kuchukua sehemu ya umiliki wa biashara hiyo, lakini mantiki inabaki pale pale kuwa faida itokanayo na madini ni lazima igawanywe baina mchimbaji na mwenye ardhi ingawaje kwa asilimia tofauti; ingawa ninadhani pia kuwa serikali imedai asilimia kubwa sana.

Haiwezekani serikali ibaki na jukumu la kufukia mashimo tu huku faida yote inachukuliwa na mwekezaji. Kosa ambalo limekuwapo ni pale wawekezaji walipobebwa kama mayai na kuachiwa kufanya kila kitu wapendavyo wakiwa virtually hawalipi kitu chochote serikalini. Sheria hiyo inarekebisha makosa hayo kama ambavyo Mheshimiwa Zitto kafafanua hapo juu.

 

[Kichuguu]

Thanks for your comments. Please allow me to be very upfront and bold, The Mining Act of 2010 is 'pretty useless', it is lacking in economic merit, it is lacking in value proposition to investors and that is why it is now over 3 years since it was passed by Parliament and not a single investor came to the country to give away 50% of free equity.

That is why I am now suggesting that we have a live radio debate so that both sides will have an opportunity to support or critique the law.

I am not very sure on the validity of your observation in red because I am aware of the increasing lineup of companies exploring gas and oil in various parts of the country right now. Additionally the notion of "giving away of 50% of free equity" is a distorted observation as I have pointed out earlier unless you assume the mining land to be valueless.

 

[H.S]

I am not very sure on the validity of your observation in red because I am aware of the increasing lineup of companies exploring gas and oil in various parts of the country right now. Additionally the notion of "giving away of 50% of free equity" is a distorted observation as I have pointed out earlier unless you assume the mining land to be valueless.

@KIchunguu, I have earlier stated that the ownership requirement refers to gemstone mining.

Since 2010 have you heard of a single investor who came to Tanzania, invest $100m in equity and gave away half of the company equity? Hakuna hisa hata moja iliyoptolewa bure to the Government na kampuni mpya na hata TanzaniteOne wakifanya hivyo itakuwa kwa sababu wamegeuziwa kibao. Huwezi kujenga mazingira ya biashara kwa 'kuwategeshea' wawekezaji kwa kugeuza masharti kama vile unabadilisha shati, ukifanya hivyo rating ya taifa as an investment destination inashuka.

Kama serikali haikudai hisa za dezo lakini inagawana faida lets say nusu kwa nusu ama kwa percentages ambazo zinaridhisha kupitia mfumo wa kodi why would u consider mining land to be valueless wakati inaingiza mapato?

Kutodai hisa haimaanishi hata kidogo kutoipa ardhi thamani kwa sababu bado unapata mapato from tax.

Ukiwa na shamba lako na unapata malipo kutokana na mavuno haimaanishi shamba lako halina thamani eti kwa kuwa huna hisa katika kampuni inayovuna from your farm.

By defination an asset ama wealth ni kitu chenye manufaa na una legal right to it na kinakupatia manufaa kama vile mapato na sio lazima uwe unamiliki hisa. Serikali yoyote ile duniani ni 'silence mwanahisa' shareholder of any business operatimng in its jurisdiction kwa sababu ina mamlaka kamili ya kutumia sheria kuifanya kampuni ilipe kile ambacho serikali inaona is reasonable. From economic standpoint Serikali tayari ni mwanahisa wa makampuni yote nchini klwa sababu ina uwezo wa kutoa amri za kisheria wafanye lolote lile linalohusiana na mapato ama regulation.

The mining land is not valueless that is why it can attract investors and u can get revenue from investments.

Mtu binafsi ndio analahitaji kuwa shareholder wa kampuni ili awe legally eligible to mapato ya kampouni, serikali ina eligibility amabyo ni natural bila ya kumiliki hisa.

Is that clear? So why all this politics about demanding free shares? That is why I am saying that is vain politics and not economics. Umenifahamu?